Moving Virtual Assets Is an Activity in Its Own Right

Schedule 1 of VARA's Regulations defines VA Transfer and Settlement Services as the transmission or transfer, and/or settlement, of virtual assets from one entity to another entity or from one entity to another virtual asset wallet, address or location. Read that last limb slowly. It does not require two clients, or a counterparty relationship, or a change of beneficial owner. Movement between wallets, addresses or locations is inside the definition.

That is broad enough to catch a great deal of what its builders think of as plumbing: settlement layers, routing services, bridge operators presented as infrastructure, treasury movement tooling offered to third parties. Whether any particular one of them is carrying on the activity by way of business is a separate test, and VARA holds sole and absolute discretion over it, having regard to whether the firm holds itself out as doing this by way of business, the regularity, scale and continuity of the activity, and whether there is any commercial element including value in kind. There is no published volume floor that puts a firm outside the perimeter.

Custody is otherwise exclusive. VARA requires a custodian to be a separate legal entity from any group member carrying on other virtual-asset activities. The Custody Services Rulebook then makes one express exception, and transfer and settlement is it: a custodian may apply for a VA Transfer and Settlement Services licence in the same entity, granted only subject to VARA's satisfaction on all relevant requirements, including strict enforcement of policies achieving the necessary segregation between the custody operations and the transfer and settlement operations.

This matters more than it looks. For a group that both safekeeps and settles, the difference between one entity and two is decided by whether a segregation case is accepted — and that case is a design question, not a filing question. VARA's own public licensed-activities page states the exclusivity rule without mentioning the exception, so a reader working from the summary would plan for a structure the rulebook does not actually require.

The Central Bank's Payment Token Services Regulation describes payment token services as digital payment services in the UAE comprising three categories: Payment Token Issuance, Payment Token Conversion, and Payment Token Custody and Transfer. Article 2(1) then states the prohibition in its own right: no Person shall perform any Payment Token Service within the UAE or directed to Persons in the UAE, unless such Person is Licensed or Registered by the Central Bank to perform such Payment Token Service.

That paragraph settles the overlap question on its own wording. It is drafted against no Person, it carries no exception, and nothing in it turns on what else the firm holds. An existing virtual-asset licence is therefore not an answer to the payment-token question — it is a different question, asked by a different regulator, about the same movement of the same asset.

The regulation also says as much in terms, though at the paragraphs that follow rather than at paragraph 1. Article 2(2), which reaches services similar or equivalent to a payment token service performed on a means of payment that is not a payment token, and Article 2(3), which prohibits algorithmic stablecoins and privacy tokens, each carry the sentence that this prohibition shall apply to all Persons, including any Person acting in the course of performing Virtual Asset activities for which it is licensed or regulated by SCA or a Local Licensing Authority. Read together, the article closes the door and then names the people who might have thought it was open to them.

One further point is stated in the same regulation and is worth holding onto. Denomination is fixed: dirham payment tokens must be denominated only in dirham, and foreign payment token issuers only in a foreign currency.

ADGM's list of virtual-asset regulated activities, set out in COBS 17.1.1, contains seven items: dealing as principal, dealing as agent, advising, arranging deals, managing assets, providing custody, and operating a multilateral trading facility. There is no transfer or settlement activity on the list. The word transfer appears instead as a modality inside the statutory prohibition at FSMR section 5A(4), which bars carrying on a regulated activity involving the issue, sale, purchase, transfer or custody of an algorithmic stablecoin, a privacy token or a digital asset employing similar technology.

So a movement business analysed under ADGM's framework is not asking whether it fits a transfer permission. It is asking whether the control it exercises over assets in transit amounts to Providing Custody — which returns you to the three wallet arrangements, to the footnote that pulls multi-signature designs in which the firm holds a required key into the outsourced-custodial type, and to the word 'generally' that both ADGM and the federal guidance use rather than draw a line.

Two regimes, two vocabularies, and a business model that has to be described accurately in both. Neither description is a translation of the other, and a firm cannot map one onto the other by activity name.

The perimeters here are not neatly territorial in the way founders expect. VARA's requirement bites where the activity is offered in or from the Emirate of Dubai, whether to customers resident in the Emirate or to global customers where the activity is permissible. The Central Bank's payment-token prohibition bites on services performed within the UAE or directed to persons in the UAE, from anywhere.

The result is that offshore customers do not remove the UAE perimeter for a UAE-based firm, and being outside the UAE does not remove it for a firm pointing inward. A single go-to-market plan can trigger two UAE regimes and a foreign one, and the interaction is a structuring question rather than a compliance chore.

Two things sit under every transfer-business conversation and neither has a published answer.

The first is characterisation. Whether the thing in transit is a virtual asset or a payment token turns on purpose and use rather than on code, and no regulator publishes how a mixed-use instrument is characterised or who decides. The federal position is that virtual assets for investment purposes sit with the capital-market regulator and virtual assets for payment purposes sit with the Central Bank — which is a clear rule about a distinction nobody has made operational.

The second is control. How much influence over the transit path pulls a movement business into custody as well is not stated anywhere in the published record, in Dubai or in Abu Dhabi. That is the difference between one licensed company and two, and it is decided by the architecture rather than by the description of it.

Characterisation and control are the two variables that decide a movement business, and neither has a published answer. They are settled by reading a specific transit architecture against two UAE regimes with different vocabularies, and by accepting that one of the two regulators may take a different view of the same design.

If your model moves anything for anyone, bring us the transit path, the asset and the go-to-market plan before the entity is incorporated. We will tell you which perimeters the model sits inside and what would have to change to sit inside fewer of them. This is structuring commentary rather than legal advice, and it is not an opinion on how any regulator will read a particular set of facts.